Seeking Alpha
Long only, value, momentum, research analyst
Profile| Send Message|
( followers)  

To strengthen its electronics and energy segment, 3M (MMM) recently collaborated with Cambrios to launch a new touch sensor film (Silver Nanowire) for touchscreen devices. This will help 3M to advance its footprint in new nanowire-based technology for touchscreen devices ahead of the traditional indium tin oxide, or ITO. These films will be based on Cambrios's silver nanowire ink, and 3M will market the products based on this technology, which includes "3M Patterned Silver Nanowire Touch Sensor Film," "3M Patterned Metal Mesh Touch Sensor Film," and "3M Advanced ITO Touch Sensor Film."

All these films are made-up of a flexible material that can conform to gently curved surfaces, enabling rounded designs, next-generation curved and roll-able touch sensors. This technology will allow 3M to offer high-quality, high-volume touch sensor films. The sensor films will enable multi-finger, multi-touch applications, enhancing the touch-sensitivity options for OEMs and ODMs and helping them to build next-generation touch-enabled smartphones, notebooks, tablets, all-in-ones and monitors. The films offer the transmittance of more than 89%, optical clarity and reduce haze.

Along with smartphones and tablets, these films also support large touchscreens with the diagonal size of 46 inches. It is estimated that the new 3M Advanced ITO Film will enable touch panel manufacturers and integrators to increase production to meet growing consumer demand for touchscreens. 3M intends to increase its global touch sensor film manufacturing capacity by 10 times in 2014 to reach more than 600,000 square meters per month. The silver nanowire and metal mesh films are expected to reach market by the first quarter of 2014. By enhancing its capacity, 3M may support manufacturers of touchscreen devices to meet the growing demand for these products. Doing so will further strengthen 3M's presence in the touchscreen market and strengthen its top-line in the coming quarters.

3M also is expected to enhance Microsoft's (MSFT) Windows 7 applications, with its multiple display applications. 3M's applications will increase Windows' multi-touch capabilities and simultaneously boost speed and accuracy, as well as help multi-touch software developers develop more immersive applications that enable multi-users to operate the device and enhance their touchscreen experience.

The new application will likely help Microsoft tap the touchscreen market by offering the unique experience, which in turn should lead to higher sales and boost 3M's top-line. In addition, 3M's other multi-touch display features enhance touchscreen capabilities by tracking around 60 simultaneous touches at an ultra-fast response time.

3M building base with acquisition plans

3M's acquisition of Ceradyne helped it to diversify its portfolio and strengthen its presence in the industry. The company plans to invest $5 billion to $10 billion in other acquisitions through 2017. In acquiring Ceradyne, 3M supported its leading Industrial segment, which contributes around 35% to the company's total revenue.

In the third quarter, Ceradyne received an order of $80 million from the U.S. government to supply 77,000 Enhanced Combat Helmets and associated spare parts. It received the best innovator award of 2013 for this new helmet, which is designed to have 35% better ballistic protection capacity. The deliveries of these helmets are expected to begin from first quarter of 2014. Earlier the company also received a $40 million order from the U.S. Department of Defense for making 242,000 body armor plates for soldiers.

3M's rival General Electric (GE), meanwhile, is reducing its reliance on its financial sector and focusing more on its industrial segment. It is expanding its presence in the industrial-gears sector by acquiring Allen Gearing Solutions, a manufacturer and service provider of gears for industrial and marine applications. General Electric plans to integrate Allen Gearing into the Lufkin power transmission division, a leading supplier of artificial lift and industrial-gears technology for the oil and gas industry. These acquisitions are expected to help General Electric post year-over-year revenue growth of around 5% in 2014, where its industrial segment could contribute nearly 70% of the total earnings. The company is also expected to repurchase more than half a billion shares by 2015, further enhancing shareholder value.

Higher growth based on strong fundamentals

In December, 3M affirmed its five-year sales and earnings growth objectives, which it plans to achieve through innovation, business transformation and active portfolio management. According to the five-year plan, the company expects organic revenue growth of 4% to 6% and EPS growth of 9% to 11% from 2013 to 2017. It has plans to buy back shares of $17 billion to $22 billion in this period. The company is anticipating EPS of $7.30 to $7.55 and revenue growth of 3% to 6% in 2014.

With its strong share buyback plan, which is expected to surpass competitor plans, the company should achieve its projected EPS growth. Further, 3M is trailing at a P/E multiple of 21.15 times with the forward P/E of 18.45, implying strong future growth. Because of the anticipated 2014 P/E and EPS growth, 3M's stock has upside potential and should maintain investor confidence.

Source: Reasons To Stay Invested In 3M